Fridays Limted v Dawn Bunyan (Valuation Officer)

This is an appeal concerning agricultural exemption for the purposes of business rates. It is by the ratepayer, Fridays Limited (‘Fridays’), against a decision of the Valuation Tribunal for England (Mr G Garland, President), dated 24 July 2023 in which the ratepayer’s challenge to the entry of buildings at Chequer Tree Farm, TN17 3PN in the 2017 non-domestic rating list was dismissed. The President found that the three buildings concerned did not meet the test for exemption from liability for rates.

Fridays was represented by Mr Cain Ormondroyd and the respondent by Mr Guy Williams KC; we are grateful to them both. We visited Chequer Tree Farm the day before the hearing accompanied by representatives of the parties.

Our account here is taken from the evidence of fact given by Mr Andrew Friday, director of Fridays, and by Mr Evgeni Genchev of the Valuation Office Agency for the respondent. Their evidence was consistent and Mr Genchev’s was unchallenged, while Mr Friday was cross-examined only briefly.

Fridays is one of the country’s largest producers of free-range eggs, producing some 4 million eggs a week. Chequer Tree Farm is the company’s headquarters, encompassing some 530 acres in rural Kent. It also owns or operates a number of other farms within a ten-mile radius and farms some 2,000 acres of arable land, including the land at Chequer Tree Farm itself, to grow wheat and barley to make chicken feed. Free-range eggs or organic eggs are produced at the four parcels known as Combwell, Tolehurst, Summer Hill and Waterlane Farms (we refer to these four farms together as the “Fridays Farms”).

It is agreed that much of the land and some of the buildings at Chequer Tree Farm are exempt from non-domestic rating, including 482 acres of the agricultural land used to produce barley and wheat, a mill store, feed mill, and chicken houses. The chicken houses were used at the material day (September 2018) to house caged hens; it is agreed that that operation is not material to the current appeal (and it came to an end in 2021). Some other buildings, including the reception, offices, a vehicle workshop and other buildings are assessed for rating; there is no dispute before us about those buildings and we have not been told why some are assessed for rating and some are not.

Three buildings at Chequer Tree Farm are the subject of the single issue before us – whether they should also be exempt from rating. They are the Egg Packing Centre, the Egg Packaging Store, and the Egg Warehouse, which we shall collectively call ‘the three buildings.’ The alternative valuations are agreed. If the three buildings are exempt, an assessment described in the rating list as Food Processing Centre and Premises (part exempt) of £136,000 is agreed; if they are not, the agreed figure is £352,500 RV.

The production of eggs for human consumption is of course heavily regulated, and a lot of land is needed both for disease control requirements and in order for eggs to be classed as free range; one shed housing 64,000 birds requires 79 acres or 32 hectares of “ranging land”. The practical consequence of this is that while Fridays would operate its egg production business from one site if that were possible, according to Mr Friday, that would require a site of over 400 acres and there is no suitable site of that size available. The business has therefore created a collection of sites in a ten-mile radius.

At Chequer Tree Farm itself, therefore, the arable land is used for barley and wheat, which is milled on site and fed to the hens at the other holdings; and eggs come from the other holdings to the three buildings to be packaged. So far as this appeal is concerned all that happens at Chequer Tree Farm is the growing of barley to feed the chickens on the other holdings, and the packaging of eggs at the three buildings. The arable production is carried out by three members of staff (two tractor drivers and a manager); they and their equipment are based at Tolehurst Farm. The equipment used includes tractors, trailers and a large combine harvester, and it is used to farm all the arable land occupied by Fridays.

Mr Friday’s evidence was that the other holdings are managed from Chequer Tree Farm; staff at the other locations feed the hens and manage the land and buildings, but they report to the Poultry Management Team at Chequer Tree Farm at a weekly meeting and all decisions about feeding are taken there; feeding is complex because feed is blended differently for each farm based on the age, health and productivity of the birds so there is considerable calculation and control undertaken at Chequer Tree Farm. Planning for the arrival of chickens at 1 day old and their removal for slaughter at the age of about 85 weeks (by which time the shells of their eggs are too thin for commercial use) is all done at Chequer Tree Farm. Mr Friday was cross-examined about management arrangements and confirmed that staff at the other farms are titled “managers” to reflect their skill and importance, but their role is to look after the chickens on a day-to-day basis and how they do so is determined by senior management at Chequer Tree Farm.

The production and packaging of eggs prior to sale is regulated by legislation and by the British Egg Industry Council’s “Lion Code of Practice”. Eggs have to be stamped at the producing farm before being taken to Chequer Tree Farm for packing; the procurement department at Chequer Tree Farm supplies the ink and materials for the stamping. Mr Friday was asked in cross-examination if the eggs are packed at source, and he explained that the eggs are stamped and put on to ‘keyes trays’ – large trays with egg-shaped dips to hold the eggs safely, many dozen on each tray – and then stacked on to wooden pallets and loaded on to a lorry to be brought to Chequer Tree Farm. There they are weighed, graded, stamped with their grade and date, and then the grade A eggs are packed in supermarket egg boxes, mostly for Asda and Lidl. Grade B eggs – misshapes for the most part - are picked out by the machines and packed for use for baking.

About 1.7 million eggs produced on Fridays’ Farms are processed in this way each week, but that is not enough to meet the supermarkets’ requirements. Fridays therefore also grades, packages and sells on about 1.4 million free range eggs each week from around 15 smaller independent farms who do not produce eggs on a big enough scale to do the packing themselves (and who of course cannot sell their eggs unless they are graded and packed in accordance with regulations and industry practice).

The relevant parts of Schedule 5 to the Local Government Finance Act 1988 (“the LGFA 1988”) read as follows:

Fridays’ case is that the three buildings are agricultural buildings as defined in paragraph 3(a). Therefore the issue before us can be considered in the light of two questions – are the three buildings ‘occupied together with agricultural land’, and are they used ‘solely in connection with agricultural operations on that or other agricultural land’. Both questions are in dispute. The more difficult one is whether the three buildings are “occupied together with” agricultural land, and we have to consider what the phrase means in the light of the authorities.

We have been here before. In Senova Ltd v Sykes (VO) [2019] UKUT 0275 (LC) we explained that:

Crucial to what we have to decide in this appeal is whether we were right in Senova to say that “the meaning of “occupied together with” … remains unchanged despite the 2003 amendment”, and so we have to revisit Farmer v Buxted in order to assess whether what the House of Lords said there about the meaning of “occupied together with” remains authoritative. It is worth pointing out at this stage that in Senova the difficulty for the ratepayer was that the Tribunal found that it was not occupying any agricultural land; so the question whether the building was occupied together with other land did not arise. Therefore what we said about Farmer v Buxted in Senova was obiter and what we are going to say in the present decision does not cast any doubt on our conclusion in Senova.

We agree with the parties that in order to understand the statutory provisions we have to look at the evolution of the law over the last century, and so we explain that evolution first before considering the parties’ arguments about the two requirements.

Provision for the exemption of agricultural buildings was first made in the Rating and Valuation (Apportionment) Act 1928, which defined “agricultural buildings” as:

It is important, for present purposes, that that definition required a building occupied together with agricultural land to be solely used in connection with agricultural operations on that land.

The Rating Act 1971 extended exemption to buildings used for “keeping or breeding of livestock”, and also, by section 2, to buildings occupied together with such buildings. It was section 2 that was under consideration in Farmer v Buxted, which was about a poultry processing factory used for the slaughter and processing of chickens reared in “broiler houses” (meaning houses for battery hens) at 48 farms at various distances – ranging from one quarter of a mile to 120 miles – away from the factory.

To be exempt under section 2 a building that was not itself used for keeping or breeding livestock had to be “occupied together with” one or more such buildings and used solely in connection with operations carried on in those same buildings (or occupied together with those buildings and with agricultural land, and used solely in connection with operations in the buildings and with agricultural operations on that land). The same provision is found today in paragraph 5 of schedule 5 to the LGFA 1988. In Farmer v Buxted the ratepayer argued that the processing plant was occupied together with the broiler houses on the 48 farms. By the time the case reached the House of Lords it was no longer in dispute that the factory was solely used in connection with the agricultural operations carried on in the broiler houses. The issue was whether it was also occupied together with those farms.

By 1992 when Farmer v Buxted was heard a body of case-law had built up around the meaning of “occupied together with”. The Lands Tribunal had taken the view in a number of cases that geographical separation did not matter; what mattered was that the functional connection between the building in question and the building or land together with which it was claimed to be occupied. Thus in Hilleshog Sugar Beet Breeding Co. Ltd. v. Wilkes (Valuation Officer) [1971] R.A. 275 it was found that a plant research centre was occupied together with a number of plots of land up to 40 miles away; in Handley (Valuation Officer) v Bernard Matthews plc. [1988] R.A. 222 a hereditament used for producing pelleted turkey feed was found to be occupied together with 29 farms, between 9 and 74 miles distant, where the turkeys were kept. In Maurice E. Taylor (Merchants) Ltd. v Commissioner of Valuation [1981] N.I. 236 the Court of Appeal found that a shed and a potato bagging and grading store were occupied together with land where the potatoes were grown, between 10 and 20 miles away; Gibson LJ and Lord Lowry LCJ both expressed the view that the connection implied in “occupied together with” was functional rather than geographical.

In Farmer v Buxted Lord Slynn at page 377 made special mention of a recent Court of Appeal decision, W & JB Eastwood Ltd. v Herrod [1971] A.C. 160:

That then was the background to Farmer v Buxted, where many of the broiler houses together with which the factory was said to be occupied were many miles away. It is interesting to look at the arguments presented to the House of Lords, set out in the Appeal Cases report. We can see that the parties agreed that the factory and the broiler houses must be in common occupation at the same time, which they were; there must be a geographical connection; and there must be a functional connection. For the ratepayer it was emphasised that distance was not decisive; for the Valuation Officer it was argued that the farms were just too far apart: “Without some form of geographical test a building in Dover could be exempt if it were 'occupied together with' a poultry farm in Calais. The buildings need not be contiguous, but through location, common ownership, common machinery and common workforce they must as a matter of fact be one poultry farm” (page 372).

The House of Lords found that the factory was not occupied together with the broiler houses. Lord Slynn, with whom their lordships all agreed, said this at page 378:

When the LGFA 1988 was enacted, paragraph 5 of Schedule 5 repeated the provisions of section 2 of the 1971 Act, and paragraph 3 of Schedule 5 echoed the definition in the 1928 Act, as follows:

However, paragraph 3 (but not paragraph 5) was amended in 2003; its current text is as follows, with the amendment underlined:

The purpose of the amendment was to allow exemption for buildings that were shared by a number of famers; the Explanatory Memorandum to the amending statute (the Local Government Act 2003) said:

So whereas before 2003 paragraph 3 of Schedule 5 required the building in question to be occupied together with agricultural land and used solely in connection with agricultural operations on that land – which Viscount Dilhorne in Eastwood described as “an attempt by the draftsman to define a farm in statutory language” - the building may now be used in connection with agricultural operations on that or other land. Does the change in the use requirement have any effect upon the meaning of the occupation requirement? That is the question we have to answer in relation to the three buildings at Chequer Tree Farm.

As we saw above, in Farmer v Buxted the House of Lords looked at the meaning of “occupied together with”, and concluded that there was more to it than a requirement that activities on the land and in the building be jointly controlled and managed, at the same time, together with perhaps a degree of geographic connection; it was also necessary for them to be “occupied together so as to form in a real sense a single agricultural unit”, or “worked together so as to form one agricultural unit.” Mr Williams KC argued that that this is more than a functional relationship; the fact that grain grown at Chequer Tree Farm is fed to chickens elsewhere who lay eggs that are packed in the three buildings is not enough to establish that the buildings form a single agricultural unit either with the arable land at Chequer Tree Farm or with the Fridays Farms.

Mr Williams KC set out and adopted what the VTE said about whether the three buildings are occupied together with the land at Chequer Tree Farm at paragraph 20 of its decision:

As to the Fridays Farms, the President of the VTE said at his paragraph 22:

Again Mr Williams KC said that that was correct. And he argued that the same approach to “occupied together with” was found in Senova, and also in the Tribunal’s decision in Wootton v Gill (VO) [2015] UKUT 548.

For the appellant, Mr Ormondroyd submitted that the reasoning in Farmer v Buxted is no longer applicable to the legislation in its current form; paragraph 3 of Schedule 5 has been amended since Farmer v Buxted was decided and the consequence of the amendment is that “occupied together with” can no longer mean “worked together so as to form one agricultural unit” with the land together with which the building is occupied.

In summary, according to Mr Ormondroyd, a building can satisfy the definition of an agricultural building if it is occupied together with agricultural land but used solely in connection with agricultural operations on other land. Occupation and use no longer have to relate to the same land – in contrast with the position when Farmer v Buxted was decided. Where a building is occupied together with agricultural land it is therefore no longer necessary to find that it is worked as an agricultural unit with that land; all the “working”- the functional connection - can be done in connection with other land. Accordingly there is no barrier to finding that the three buildings are occupied together with the arable land at Chequer Tree Farm

The respondent’s answer to that is that where words in a statute are unamended their meaning must be regarded as unchanged; the words “occupied together with” have not changed and the analysis in Farmer v Buxted remains authoritative. And it is not possible to say that the three buildings are “worked together with” either the land at Chequer Tree Farm, or the other Fridays’ Farms, as an agricultural unit; they are not worked together, their functional connection is too distant.

In the course of the hearing the Tribunal asked Mr Williams KC if he construed the words “that or other agricultural land” to mean “that land, or that and other agricultural land” and he confirmed that he did. He argued that the 2003 amendment extended exemption to cover buildings occupied by Farmer A together with agricultural land and used in connection with agricultural operations not only on that land but also on the land of Farmers B and C who share the equipment stored in the building. Prior to the amendment the shared use would have ruled out exemption but now it does not. The amendment did not go so far as to exempt buildings that are not used in connection with the land together with which it is occupied.

Mr Ormondroyd referred in his skeleton argument to the explanation given by Mr Nick Raynsford MP, one of the promoters of the Bill, in response to questions in committee, with added emphasis:

Mr Ormondroyd maintained that the effect of the amendment is that a building may be used solely in connection with agricultural operations on land beyond the land together with which it is occupied.

Finally and in any event Mr Ormondroyd contended that the three buildings are occupied together with the arable land at Chequer Tree Farm, and with the Fridays Farms, whether or not we accept his argument that the “agricultural unit” interpretation in Famer v Buxted is not applicable to the statute as it now stands. As to the arable land at Chequer Tree Farm, he argued that it and the three buildings are in common occupation by Fridays, are controlled together as part of Fridays’ farming enterprise and both used as part of the egg farming operation, managed from the Chequer Tree Farm offices, as well as being physically contiguous and part of the same hereditament.

As to the Fridays Farms Mr Ormondroyd said that they too are in common occupation by Fridays, are controlled together as part of Fridays’ farming enterprise and used as part of the egg farming operation, managed from the Chequer Tree Farm offices. Moreover they are used directly together in the process of producing eggs for sale, and although not contiguous are close enough to form a single agricultural unit.

It is well-established that where statutory wording is changed its meaning is presumed to have been changed whereas if it remains unchanged its meaning should be unchanged. Thus far we agree with the respondent. The question is whether the appellant is correct to say that the amendment to the second requirement (about use) in paragraph 5(3)(a) of Schedule 5 has necessarily had an effect upon the construction of the unamended words “occupied together with”.

The answer depends upon whether the words “on that or other land” means “on that land, or on that and other land”. In other words, is the word “or” in “that or other land” used in the inclusive sense or the exclusive sense?

Certainly the respondent is right to say that the effect of the amendment is that where Farmer A’s machine shed is surrounded by Farmer A’s land where the machinery is used, the amendment saves the exemption in a case where the combine in the shed is also used by other farmers. It still has its close connection with the land next to which it is situated, being in the same occupation at the same time, being contiguous, and having a close functional connection so that the building and the land are or are part of the same farm.

The question, which has not been answered before this appeal, is whether the amendment saves the exemption in a case where Farmer A’s machine shed is occupied by Farmer A and is adjacent to agricultural land also occupied by Farmer A, but where the machinery in the shed is used on agricultural land elsewhere (whether by Farmer A or by other farmers or both). The shed is still in the same occupation as the land next to it, at the same time, but it does not have any functional connection with it. Is it occupied together with it?

In that situation, on Mr Ormondroyd’s argument, the shed has the exemption. It is occupied together with the agricultural land next to it, and its sole use is in connection with agricultural operations, but on other agricultural land. And that situation is identical to the situation in the present appeal where the three buildings are used in connection with agricultural operations on other land, not on the arable land next to it.

For Mr Williams KC there is no exemption in that case.

We agree with Mr Ormondroyd on this point. Looking at the example of shared use in paragraph 44 above, that is the sort of situation that the amendment was designed to save, and for it to be disqualified because the shed is next to agricultural land belonging to Farmer A but not the right bit of Farmer A’s agricultural land seems arbitrary. We think that the word “or” is generally exclusive in ordinary language; and we note that where a statute contains a list of alternatives separated by the word “or” it is used in an exclusive sense – any one of the alternatives will suffice. The literal construction, taking that as exclusive, accords with the purpose of the amended provision. And in light of the ambiguity it is permissible to note the words of Mr Raynsford MP, quoted above, who appears to have taken a view consistent with what is said for the appellant.

On the basis that “or” is exclusive, and that the respondent’s construction of “or other land” is incorrect, “occupied together with” can no longer require a functional connection and cannot imply that the land and the building have to be a single agricultural unit. Occupation and use have been split up by the amendment; occupation can therefore no longer require a functional connection, let alone anything closer such as constituting or being part of a farm or unit. Nevertheless the word “together” is likely to have a meaning beyond occupation by the same person at the same time, and we take it to mean that the building and the land must be occupied as part of the same enterprise and must be geographically close if not contiguous.

Accordingly we have to distinguish Farmer v Buxted; it remains authoritative as to the meaning of “occupied together with” in paragraph 5 of Schedule 5 to the LGFA 1988 but is no longer relevant to the construction of those words in paragraph 3.

So we were wrong to say in Senova that the meaning of those words was unchanged by the 2003 amendment. That has no effect upon the result in Senova (where the point was not argued) for the reasons we gave above (paragraph 15). And what we have said here is consistent with the outcome in Wootton v Gill (VO) [2015] UKUT 548, where again the point was not argued because the building in question had a close functional connection with the agricultural land together with which it was occupied.

On the basis of what we have said above, there is no difficulty in finding that the three buildings were occupied together with the arable land at Chequer Tree Farm. They were in the same occupation at the same time; they are contiguous (the fields are just across the yard behind the buildings); they are part of the same business enterprise.

In case we are wrong to distinguish Farmer v Buxted we go on to consider whether the three buildings were occupied together with either the arable land at Chequer Tree Farm or the Fridays’ Farms, in the sense of forming a single agricultural unit with them.

In order to do that we have to consider what an “agricultural unit” is. This is not a statutory term. Lord Slynn in introducing it as part of the meaning of “occupied together with”, refrained from defining it, save to say that it is not the same as a farm. It was the extension of the legislation to include buildings occupied together with other buildings that led Lord Slynn to say “it is not right now to ask whether the two premises constituted one 'farm' in the ordinary sense”, and that is perhaps the best clue we have as to what an “agricultural unit” is.

In explaining why the factory was not a single unit with the broiler houses Lord Slynn pointed out (at page 379) that it had not been suggested that any two of the broiler houses formed a single unit; that being the case, and having regard to their physical separation, he said that it was not possible to conclude that any of the 48 farms was “occupied with” the factory. From that we can conclude that being an agricultural unit must be something to do with management; the problem was that the 48 farms were each run separately rather than being a unit with one or more others. And it seems that proximity is important although not definitive.

So: are the three buildings worked together with the arable land at Chequer Tree Farm in the sense of being worked as a single agricultural unit? We think not. They were under common ownership and common occupation, they were contiguous and they were part of the same business enterprise of producing eggs for sale. But they were functionally independent. Each was managed by Fridays Limited but through different individuals. The arable land was used to produce grain, which was used to supply the Fridays Farms but did not have to be; it could have been sold. So the connection between the arable land and the Fridays Farms was thin; the arable land and the farms could have been run without that connection. And the only functional connection between the arable land and the three buildings is the Fridays Farms, which took the grain and produced the eggs.

So on the Farmer v Buxted understanding of “occupied together with” we find that the three buildings were not occupied together with the arable land at Chequer Tree Farm. Their operations and management were not connected with each other.

Next, are the three buildings occupied together with the Fridays Farms in the sense of being worked as a single agricultural unit? Again they are under common ownership and occupation; they were not contiguous but they are all near each other; and they were part of the same business enterprise of producing eggs for sale. But were they sufficiently functionally close to be described as a single unit?

It is not possible to sell loose eggs. Even at a garden gate with an honesty box they have to be in an egg box or tray of some kind. But the individual farms are able to cope with that by putting the eggs into the keyes trays on pallets. But it is also impossible to sell eggs that have not been graded and weighed, and that is what the Fridays Farms themselves cannot do. We have seen the equipment involved; it is big and costly and it is obviously a process that has to be to some extent centralised. That is why the independent farms send their 1.4 million eggs a week to Chequer Tree Farm because they too do not have the equipment to do what is needed in order to sell their eggs (which is the point of the operation).

Accordingly we take the view that despite their not being contiguous with Chequer Tree Farm and the three buildings – although they are not far away – the Fridays Farms are operated as a single agricultural unit with the three buildings and vice versa. Neither is any use without the other.

We can now turn to the second requirement in paragraph 3 of Schedule 5; the three buildings must be solely used in connection with agricultural operations on agricultural land. We can deal with this more shortly.

The appellant argues that the three buildings are used solely in connection with agricultural operations on the Fridays Farms and the independent farms. Those farms do have sheds for the hens to roost and lay eggs in, but those sheds are not comparable to the broiler houses in Farmer v Buxted; these are not battery hens and the sheds are ancillary to the surrounding land where the chickens range. The appellant’s case is that the three buildings at Chequer Tree Farm are solely used in connection with the agricultural operations on the land, not the buildings, at Fridays Farm (if the connection argued was with the buildings then the appellant would have to use paragraph 5 of the Schedule 5, but that is not its argument). And the essential function of weighing, grading and packaging is something that has to be done with the eggs laid on the Fridays Farms; otherwise the farming operation fails because the eggs cannot otherwise be sold (because of the regulatory framework for the egg market).

The respondent argues that the three buildings are not ancillary or subsidiary to the land at Fridays Farms; their use is a “primary use” of land for packing and distribution purposes, and goes well beyond operations that can reasonably be said to be consequential to the agricultural operation of producing the eggs. Similarly, the three buildings are an independent packing hub for the independent farms.

We think that the respondent’s argument lays too much weight on the packing of the eggs, and overlooks the weighing and grading. Regulations and industry practice make it impossible to sell the eggs without this operation; and the packing of the eggs goes hand-in-hand with their grading, because the grade A eggs go into supermarket boxes for retail while the grade B eggs take a different journey in keyes trays, as we saw. The necessity for these processes to be done before the eggs can be sold gives the three buildings a close functional connection with the agricultural operation of producing eggs on the land at Fridays Farms, and therefore we take the view that the second requirement is met.

In conclusion, we respectfully disagree with the learned President of the VTE. The appeal succeeds.

In those circumstances the parties agree that the correct assessment in the Rating List is £136,000.

This decision is final on all matters except costs, and a letter outlining the procedure for making costs submissions, in the event that they cannot be agreed, accompanies the decision.